Regulator wants consumers to better understand the costs and risks

Since 2010, banks cannot automatically enroll customers in "overdraft protection." Bank customers now have to specifically "opt-in" for this kind of coverage.

Prior to the change in the law, it might be days before consumers learned they had overdrawn their accounts. If there wasn't enough money in the account to cover a debit card purchase, the bank would let the purchase go through, then charge the customer a fee of as much as $35.

CFPB claims the bank tricked consumers into signing up for expensive service

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against TCF National Bank, accusing it of tricking consumers into agreeing to pay for costly overdraft services.

Under recent changes in the law, a bank cannot charge overdraft fees on debit purchases or ATM withdrawals unless the consumer specifically agrees.

Before that change to the law, consumers might get hit with four or five overdraft fees after a shopping spree because they didn't have enough money in their account to cover the purchase.

Instead of declining the purchase at the point of sale, so the consumer would know he or she was overdrawn, the banks would cover the purchase but assess an overdraft fee for each transaction.

Short term loan

Banks justified this as a service they were providing their customers -- a short-term loan, if you will. But many consumers objected, saying they would rather their purchase be declined and not have to pay a fee.

So the law allows banks to provide this "service" to their customers, but requires customers to "opt-in," specifically telling the bank they want it.

In the case of TCF National Bank, the CFPB charged the bank designed its application process to make it appear that customers had to agree to accept "overdraft protection" when they opened accounts.

“Today we are suing TCF for tricking consumers into costly overdraft services in order to preserve its bottom line,” said CFPB Director Richard Cordray."TCF bulldozed its way through protections against automatic overdraft enrollment and then celebrated its unusual sign-up success. With today’s action, we are standing up for consumers’ right to understand and choose what services they receive.”

The suit asks for compensation for affected consumers, an injunction to prevent future violations, and a civil money penalty.

Consumers' rights

The normal course of action when consumers make a debit card purchase for which there is not enough money in their account is for the sale to be declined. That alerts the consumer to the account deficiency and avoids expensive fees.

Most banks are perfectly willing to cover these purchases but charge hefty fees for this service. The law makes clear that consumers must make an informed choice to have this service and a bank cannot unilaterally enroll them in it.

It should be noted the law on overdraft fees applies only to debit cards. It does not include checks. If you write a check and have insufficient funds to cover it, your bank will assess a fee and make up the deficiency out of your next deposit.

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against TCF National Bank, accusing it of tricking consumers into agreeing to pay for costly overdraft services.

Under recent changes in the law, a bank cannot charge overdraft fees on debit purchases or ATM withdrawals unless the consumer specifically agrees.

Before that change to the law, consumers might get hit with four or five overdraft fees after a shopping spree because they didn't have enough mone...

Millions of consumers have opted-in to still get hit with the high fees

A new federal law implemented six years ago was supposed to resolve the issue of bank overdraft fees, which often blindsided consumers with unexpected expenses.

Before the law was passed, a consumer making a debit card purchase, and not having sufficient funds to cover the purchase, would be automatically “loaned” the funds to cover the purchase. The bank would then charge the consumer a fee of $30 or so for that service.

Report finds California state benefit recipients spend about $19 million

If you look at your bank statement each month and wonder where the money went, take a hard look at the bank fees – particularly the ATM fees.

While it usually costs you nothing to use your bank's ATM, if you get money from a bank not in your network the fees quickly add up. The bank that operates the ATM charges you a fee and usually, so does your bank.

In 2013 the General Accountability Office released a report that found the prevalence and amount of ATM surcharge fees consumers paid to banks and other financial institutions have increased since 2007, with the estimated average surcharge fee for financial institutions that charged a fee increasing from $1.75 in 2007 to $2.10 in 2012, in 2012 dollars.

A consumer withdrawing just $20 from an out-of-network ATM would pay more than 10% of that amount as a fee.

Eating into benefits

While this is a drain on the average consumer's bank account, it's worse for consumers who don't have a bank account but receive government benefits through an Electronic Benefits Transfer (EBT) card, which works like a debit card. Anytime they use an ATM to get cash, financial institutions take a bite of the taxpayer money intended for assistance.

Just how much? Andrea Luquetta, Policy Advocate at the California Reinvestment Coalition, is author of a report that found $19 million of California tax dollars meant for various public assistance programs went instead to ATM fees, charged to access that aid.

“For families trying to escape poverty, these fees siphon away money that could be used for school supplies, transportation or medicine,” Luquetta said. “The current system leads too many people to pay fees just to access the very benefits they need to survive.”

The California Reinvestment Coalition is calling on the state and the financial services industry to find a solution so that aid dollars aren't eaten up by ATM fees.

Unbanked population

Part of the problem is the fact that fewer people – low-income consumers in particular – have bank accounts these days. The growing “unbanked” population has been well documented, with bank fees on checking and savings accounts driving more people to a cash economy.

Among the report's recommendations is for banks to offer inexpensive bank accounts so recipients can receive benefits by way of direct deposit, avoiding fees. In 2011, the Federal Deposit Insurance Corporation (FDIC) found that 1 in 12 U.S. households did not have a bank account, which would give them free access to an ATM.

What to do

What can consumers do to reduce their ATM costs? Planning their use of ATMs may help. A few merchants – primarily a few convenience store chains – offer access to ATMs that don't charge fees. Finding these locations and using them when you need cash can help reduce ATM expenses.

Getting cash back at the grocery store or other retail transaction is another way to cut down on ATM fees. Also, finding a bank that charges fewer and lower fees can also help.

FindABetterBank.com provides a search platform for consumers to seeking a particular benefit – such as low ATM fees – and matches them up with banks in their area. Believe it or not a couple dozen banks offer plans that reimburse all ATM fees.

If you look at your bank statement each month and wonder where the money went, take a hard look at the bank fees – particularly the ATM fees.

While it usually costs you nothing to use your bank's ATM, if you get money from a bank not in your network the fees quickly add up. The bank that operates the ATM charges you a fee and usually, so does your bank.

In 2013 the General Accountability Office released a report that found the prevalence and amount of ATM surcharge ...

Consumers need better protections to safeguard bank accounts

A new survey of overdraft fees charged by the nation's largest banks reveals bankers are hiking fees, adding new fees, and shortening time limits to trigger fees when banks pay overdrafts and extend credit to families struggling to make ends meet.

According to the Consumer Federation of America (CFA), the Federal Reserve has failed to protect consumers from unauthorized bank overdraft loans and, as a result of this inaction, fees for these extremely expensive loans are escalating and multiplying.

Testifying before Congress recently in support of President Obama's proposed Consumer Financial Protection Agency, the CFA noted that regulatory inaction in just this one area is costing hard-pressed consumers over $17.5 billion during the worst economic downturn since the Depression.

In a typical overdraft loan program, banks unilaterally lend money to consumers without the consumer's knowledge or consent by paying or authorizing checks, debit card purchases, ATM withdrawals and preauthorized electronic payments when there is insufficient money in the account to cover the transaction.

Banks charge a flat fee per overdraft, taking funds directly from the next deposit into a consumer's bank account to repay the overdraft and cover the fee. A growing number of large banks charge additional fees when consumers are unable to repay the overdraft and fees within just a few days, diverting funds from consumers to their banks.

"For years, consumer advocates have complained about these anti-consumer practices and urged the Federal Reserve to force banks to comply with the Truth in Lending Act and get their customers' consent to use this extremely expensive form of credit, but the agency has turned a deaf ear to those requests," stated Jean Ann Fox, CFA's director of financial services. "Instead, the agency has continued to allow banks to collect billions of dollars in overdraft loan fees for credit extended without the customers' consent, and without providing either information on the cost to borrow or affordable repayment schedules."

CFA, along with many consumer and community groups, has voiced support for creation of the Consumer Financial Protection Agency to make consumer protection the top priority for an independent federal agency. The group also supports Rep. Carolyn Maloney's bill (H.R. 1456) to give consumers control over overdraft loans, and Sen. Dick Durbin and Rep. Jackie Speier's bills (S. 500, H.R. 1608) to extend the 36 percent annual rate cap on credit set by Congress to protect Service members to all Americans.

In July CFA updated its findings from a survey of the largest banks for comments to the Federal Reserve in March 2009. All of the largest banks unilaterally authorize payment of overdrafts at the bank's discretion and charge per-overdraft fees without advance consent or on-the-spot warning to customers. They also process withdrawals largest first, or retain the right to do so, a practice that optimizes the number of transactions that will trigger an overdraft fee when consumers live paycheck to paycheck -- maximizing the cost to consumers and the income to banks.

Key findings from the survey of the top sixteen banks' fee schedules and practices:

• The median overdraft fee is $35. The highest overdraft fee is $39, charged by Citizens Bank for the third overdraft in a year. Fourteen of the sixteen largest banks charge $35 or more per overdraft, either initially or after a few overdrafts in a year.

• For example, Regions Bank in Tennessee charges $26 for the first overdraft, $35 for the second, and $37 each for three or more. Fifth Third Bank switched to tiered fees and now charges $25 for the first, $33 for the second to fourth, and $37 for five or more overdrafts in a year. In February, Bank of America dropped its initial $25 fee and now charges $35 for every overdraft over $5 total overdrawn in one day (those tiny less-than-$5 total overdrafts still cost a $10 fee).

• Over 60 percent of the largest banks charge "sustained overdraft" fees when consumers are unable to repay the overdraft and fee in a few days. As of August 1, BB&T will impose its $30 extra fee after only five days, down from seven days. In June, Bank of America started charging a $35 sustained overdraft fee when its customers are unable to repay within five business days. Citizens Bank charges two sustained overdraft fees if its customers are unable to repay the overdraft and fees within ten days.

• The total cost of a single overdraft at the banks' highest fee if unpaid after seven days ranges from $74 at Citizens, $72 at SunTrust, and $70 at Bank of America to $34 at CitiBank and WaMu, neither of which charges a sustained or tiered overdraft fee. If unpaid after ten days, Citizens Bank charges $109 for a single overdraft.

• Ten of the largest banks set no limits on the number of overdraft fees charged per day. And the banks that set limits provide little relief for cash strapped customers. This year Bank of America doubled its limit to ten overdraft fees per day, the same that Wells Fargo Bank sets. Both TD Bank and US Bank charge up to six overdraft and six insufficient funds fees per day.

• In the last year, overdraft fees have gone up at half the surveyed banks. Citibank's fee jumped from $30 to $34. Fifth Third Bank dropped its flat $33 fee and now charges tiered fees up to $37. PNC increased its sustained overdraft fee by a dollar to $7 per day and SunTrust upped its fees from $35 to $36 for both an initial and sustained overdraft.

Since March, Regions Bank added a dollar or two to each tiered fee while TD Bank added a $20 sustained fee after an overdraft is unpaid nine days.

• The cost to borrow $100 via overdraft for seven days, if computed as a closed-end one week payday loan, ranges from 1,768 percent APR at CitiBank and WaMu to 3,848 percent APR at Citizens Bank. A Bank of America $100 overdraft repaid in one week costs $70 or 3,640 percent APR.

"Inaction by bank regulators to protect struggling consumers against astronomically expensive unauthorized overdraft loans illustrates why American consumers need the Consumer Financial Protection Agency to put consumer protection first," Fox stated. "Even now, after banks that brought the global economy to the brink of collapse have received billions in taxpayer bailouts, bank regulators appear to care more about protecting bankers' bottom lines than they do about protecting consumers' checking accounts and family budgets."

A new survey of overdraft fees charged by the nation's largest banks reveals bankers are hiking fees, adding new fees, and shortening time limits to trigger fees when banks pay overdrafts and extend credit to families struggling to make ends meet.

According to the Consumer Federation of America (CFA), the Federal Reserve has failed to protect consumers from unauthorized bank overdraft loans and, as a result of this inaction, fees for these extremely expensive loans are es...

The bank charged overdraft fees to customers who had not opted-in for coverage, the CFPB charged

For the first time, the Consumer Financial Protection Bureau has taken action against a bank for violating regulations governing bank overdraft fees.

The bureau announced Tuesday that Regions Bank has been fined $7.5 million for charging overdraft fees to thousands of consumers who had not opted-in for overdraft coverage. The fine comes on top of a consent order with the bureau, also announced Monday, requiring the Birmingham, Ala.-based bank to pay back all consumers wh...

Study confirms many families are unable to avoid rising bank fees and penalties

There's a lot of talk about cutting the banking fees paid by lower-income consumers but so far it's hard to find anything more than talk.

There are scattered new entrants, like PerkStreet and Simple, that offer free checking and debit cards but they don't have physical branches. So without direct deposit -- something the underemployed often don't have -- it's difficult to make deposits in a timely manner.

And as for established banks, a new study by the Consumer Federation of America (CFA) finds that consumers are having difficulty avoiding rising checking fees unless they directly deposit regular income checks such as paychecks, pension checks, and Social Security checks.

The CFA found that many interest and noninterest-bearing checking accounts require consumers who are unable to maintain average balances of $1,500 -- a large majority of checking customers -- to be charged regular monthly fees that total as much as $300 annually.

Just triggering one debit card overdraft, having one check returned for insufficient funds, and having one deposit rejected could add an additional nearly $100 in charges to the annual cost of using a checking account, CFA found.

This is what happened to Mark of Fort Lauderdale, Fla., who posted on ConsumerAffairs about his recent experience with Bank of America: "I am disabled due to 9/11/2001. I have a fixed income and try to balance the account to the penny. Something went wrong this month, and I was overdrawn $3. The bank charged me $35. This is causing me to get further behind. I called a supervisor who told me I had reached my quota for courtesy adjustment and could do nothing to help."

This is not something that is flying under consumers' radar. We conducted a computerized sentiment analysis of 39,000 consumer comments on social media over the last year and found bank fees about as popular as a Black Plague epidemic, with nearly 60% of the expressed sentiments being negative.

CFA's study

CFA performed research analyzing both bank checking account characteristics and consumer attitudes towards checking accounts as part of their analysis of the 25 largest banks according to the number of branches. The research revealed a great diversity of checking policies and prices at the 25 banks.

For example, the following banks each offer free checking with no waiver requirements – PNC’s “Free Checking,” M&T Bank’s “Free Checking,” First Citizens Bank’s “Free Checking,” Huntington National Bank's “Asterisk-Free Checking,” and New York Community Bank’s “My Community Free Checking” and “My Community Interest Checking.” At the other end of the scale, consumers would have to keep $25,000 in combined accounts at BB&T to avoid paying $25 per month for the Elite Gold interest-bearing account or at Keybank for the “Key Privilege” account.

And while these banks may offer free and low-cost checking, that doesn't mean that every customer benefits, or that the plan always works out as consumers expect. Witness the example of PNC customer Lori, who posted to ConsumerAffairs recently about her experience:

"They constantly reverse sequencing of checks so they can cause overdraft on checks that were previously processed. I have been overcharged huge overdraft fees because of how they reverse sequences. They make sure they process the largest check that will cause all checks that were previously processed to bounce!"

“Banks are increasing fees and balances needed to avoid fees,” Jean Ann Fox, CFA's Senior Adviser for Financial Services noted. “These higher fees and hurdles to avoid fees are especially challenging to the 45 percent of accountholders who maintain low balances and are most likely to overdraw their accounts.”

It should come as no surprise that consumers are annoyed, even hostile, about this state of affairs. This chart shows the top negative and positive emotions expressed by consumers while discussing bank fees:

Examining the verbatim comments that are summarized in this chart, by the way, reveals that the positive emotions are generally related to banks and credit unions that do not gouge their consumers. There were virtually no positive comments directed towards high-fee banks.

Low balance

An analysis of Raddon Financial Group survey data on consumer checking accounts found that nearly three-fifths (59%) of respondents saw checking balances fall below $500 in a typical month, with over one-third (36%) saying their balances fell below $100. And less than one-quarter (24%) said they had been able to keep balances above $1,000.

The survey found that those with low balances were the most likely to overdraw their accounts. Two-fifths (40%) of those with low balances below $500 said they had overdrawn their checking account in the past two years, while only 3 percent of those with low balances above $1,000 said they had done so. Thirty percent of all respondents said they had overdrawn their checking account in the past two years.

Direct deposits and income

The likelihood of directly depositing income checks was also highly correlated with income. Only 25 percent of those in the lowest income quintile used direct deposit. That figure was 52 percent for the second quintile, 66 percent of the third quintile, and over four-fifths of the upper two quintiles. These differences are important because a large majority of big banks will waive minimum or average balance requirements if income checks are directly deposited at least monthly.

“The families who most need free or low-cost checking are the least likely to be paid by direct deposit, either because their employers do not offer the service, they work in short-term positions, or because they are unemployed,” noted Stephen Brobeck, CFA's Executive Director. “Consumers who cannot waive fees through direct deposit and who do not have a comfortable cushion in their accounts at the end of the month pay the full freight for checking accounts.”

Unfortunately, even those who carefully set up and maintain direct deposits are not immune from high overdraft charges, as Chase Bank customer Natalie of Woodridge, Ill., reported in a posting to ConsumerAffairs:

I feel they are being criminal about their direct deposit practices. My husband would see our deposits go through at midnight Friday night. No other transactions were posted. At 3:00AM, the checks we had written for that week would go through with no problem, as there was money in our account to cover these checks. Then at 5:00AM, we would be hit with two our three insufficient fund fees for three outstanding checks which were already covered at 3:00AM! We were told that direct deposit is not always guaranteed cash so that the fees are our fault. We never had this problem with them for years. This is apparently "a new policy for price gouging". To date, our fees total is $200.

Diverse checking accounts

CFA surveyed checking accounts at the 25 largest banks by number of branches, collecting information on each bank’s budget or all-electronic account, mainstream non-interest checking account and the lowest-cost interest-bearing account. One positive finding of this research is that nearly all bank websites now include both useful summaries of each checking account and also links for fuller descriptions of the accounts including monthly fees, though finding details on overdraft fees and practices sometimes required further searching.

Budget Checking: Nine of the 25 surveyed banks offer accounts described as "budget" or "basic." These accounts cost $7 or less a month even when checks are not directly deposited and any required minimum balances are not met. Most of the free accounts, listed in paragraph 3 of this release, fall into this category.

Electronic Accounts: Bank of America, Fifth Third, and Keybank offer electronic accounts that usually require customers to conduct all banking at ATMs or online. Monthly fees can be avoided, depending on the account, by maintaining a $500 minimum balance or directly depositing income checks.

Non-Interest Checking: Most consumers utilize non-interest bearing checking accounts, which we found at 24 of the 25 banks surveyed. Monthly fees on these accounts, when minimum or average balance requirements are not met, are usually $9-10 but were found to be as high as $15. CFA’s research found that nearly all banks will waive these fees if the minimum or average balance requirements are met which most commonly is $1,500, or if funds are direct deposited. Additionally some banks will waive the fees if a minimum number of transactions occur during the billing-period.

Interest Checking: All surveyed banks offered at least one account that received interest on deposits. These accounts generally are subject to higher minimum/average balance requirements and monthly fees than non-interest accounts. These average balances are as high as $25,000 at BB&T and at Keybank, while the monthly fees are $25 per month at Bank of America, Chase, BB&T, TD Bank, and Keybank.

“As the FDIC’s 2011 Survey of Unbanked and Underbanked Households found, high fees and minimum balance requirements are an obstacle to account ownership for some unbanked consumers, especially for households who had recently been banked,” Fox noted. “Since the FDIC survey was conducted before the rash of fee hikes and higher minimum balance requirements in late 2011, it is likely that rising fees and higher thresholds to avoid fees are a serious barrier to bank account ownership for families struggling in this economy.”

There's a lot of talk about cutting the banking fees paid by lower-income consumers but so far it's hard to find anything more than talk.

There are scattered new entrants, like PerkStreet and Simple, that offer free checking and debit cards but they don't have physical branches. So without direct deposit -- something the underemployed often don't have -- it's difficult to make deposits in a timely manner.

Banks are imposing lots of new fees. Here are some ways to get around them

Big banks are raising their fees for checking accounts, debit cards and other of life's essentials. What's a consumer to do? Unless you are a big depositor with very good credit, you'll have to take a careful look at the fees your bank is charging for each type of checking account. Switching to an online-only account may be the most economical method if that's something you can live with.

It's those darned consumers again -- using too many services, not paying enough

Bank of America learned a bitter lesson last year when it tried to impose a $5 monthly fee on its debit card users.

Or did it?

Maybe the lesson the bank learned isn't the one all those outraged consumers thought it learned. Maybe the real lesson was that banks need to find a way to blame the fees on the consumer.

AT&T has always been pretty good at this. It blames consumers for using too much of their "unlimited" smartphone data plans and then imposes limits.

Bad consumer.

Bank of America thinks this might work in the banking realm as well. For example, what if consumers were told their checking account was "free" as long as they maintained a certain balance or agreed to take out a car loan or credit card account?

That's good, right? Free is good. So the customer opens the checking account, then lets the balance drop and is told she doesn't qualify for the car loan or credit card. Whose fault is that? Certainly not the bank's.

Bad consumer.

Not their fault

Well, you know, you can't blame them though. Banks just aren't making as much as they're used to, not since they made all those bad loans and had to eat all those rotten mortgages and especially since the feds came along and put limits on overdraft fees and other splendidly profitable plunder.

Take Bank of America. Its 2011 revenue dropped by $26 billion, or 22%, from its 2009 level. Think the Board of Directors likes that? Not likely.

Of course, there are banks that still offer free checking with no strings attached. The list is long and most, but not all, of them are smaller. TD Bank, for example, is a big bank but it didn't write all those bad mortgages, didn't take any bail-out money and it offers several types of free personal and business checking accounts. Heck, they're even open weekends.

But the big guys -- you know, the ones too big to fail, like BA, Chase and Wells Fargo -- they're having a hard time getting by so they're all nosing around looking for fees and charges that can either raise more revenue or encourage (i.e., intimidate) customers into doing more business with them.

Bank of America has been trying various plots -- uh, pilot -- programs in Arizona, Georgia and Massachusetts, where it's charging customers anywhere from $6 to $9 for stripped-down checking account. Basically, they're trying to find the pain point, the point at which consumers stand up and say no.

For obvious reasons, BA and the other banks aren't saying much about these plans. But when they do, you can be sure they'll leave no doubt about whose fault it is.

Bad consumer.

Bank of America learned a bitter lesson last year when it tried to impose a $5 monthly fee on its debit card users.

Or did it?

Maybe the lesson the bank learned isn't the one all those outraged consumers thought it learned. Maybe the real lesson was that banks need to find a way to blame the fees on the consumer.

AT&T has always been pretty good at this. It blames consumers for using too much of their "unlimited" smartphone data plans and then imposes l...

Consumer anger forcing Congress to get tough on high bank fees, charges

Under pressure from Capitol Hill and consumers, Bank of America and JPMorgan Chase are easing up on overdaft charges and other fees.

Banks make billions of dollars per year in revenue from overdraft charges, in many cases levying them on customers who didn't even know they had -- and had never asked for -- overdraft protection. But with Congress considering proposals to impose reforms, banks are trying to get in front of the problem with reduced fees and more lenient terms.

BofA

Bank of America said that, beginning Oct. 19, it will:

• Not charge Overdraft item fees when a customer's account is overdrawn by a total amount less than $10 for one day • Not charge overdraft fees on more than four items per day; • Improve the process for customers to opt out of overdraft capability; • Offer customers a "Clarity Commitment" that spells out in clear, unambiguous terms what customers can expect from their deposit relationship with Bank of America.

Effective June 2010, the bank will:

• Introduce an annual limit on the number of times customers can overdraw their accounts at the point-of-sale when they do not have sufficient funds to cover their transactions • Contact customers who are nearing the annual limit to provide education and tools to help them better manage their finances • Limit overdraft capability, and therefore fees, for customers who reach the annual limit • Provide new customers the choice to opt into overdraft capability at account opening.

Chase

Chase said its new policies, when fully effective, mean that customers "won't pay big fees for small mistakes." The changes will apply to all current and new customers and will include:

• Eliminating overdrafts for debit cards unless the customer opts in to overdraft services; • Modifying posting order to recognize debit-card transactions and ATM withdrawals as they occur; • Eliminating overdraft fees if a customer's account is $5 or less overdrawn' • Reducing the maximum number of overdraft fees per day to 3 from 6.

"Customers will be given the opportunity to decide whether they want to participate in Chase's debit-card overdraft services," said Charlie Scharf, head of Retail Financial Services at JPMorgan Chase. "We believe it's important to give all 25 million existing debit card customers, as well as new customers, the ability to decide whether to opt in. We expect many of our customers will continue to find these services very useful."

Chase will continue its current policy of not allowing customers to withdraw more cash from an ATM than they have available in their account.

Chase will update customer accounts and balances for debit-card purchases and ATM withdrawals as they occur. "The new posting order will be more logical for customers, and they will incur fewer fees," Scharf said.

In addition, Chase said it will continue to offer overdraft protection for customers who link their checking account to a savings account, credit card or home equity line of credit. Millions of customers use this for peace of mind in case they forget to record a transaction, make a subtraction error in their checkbook or lose track of the dates of direct deposits or automatic debits.

Chase said it expects to implement these changes in the first quarter of 2010.

Angry bankers

"I find it amusing that no banker, or bank association, was contacted for information, and certainly not a community banker. Your article was misleading on many fronts, and down right (sic) biased and disingenuous for the most part. Here are the facts as they relate to our bank, and for the most part the industry as a whole," Graham wrote.

Graham listed these "facts:"

1. You assert that banks let customers overdraw their accounts without their knowledge. BULL! First and foremost it is the customers responsibility to manage their checking account. Who else is going to know if they have money in their account besides them when they write a check? Once again though we are taking personal responsibility out of the individuals hands, blaming someone else, and asking the government to control our lives. Can you get Senator Dodd to remind me to go to the bathroom; Im not smart enough to do it myself?

2. There is a cost involved to the bank, and a charge will apply even if the check is returned. In a lot of cases if the check is returned the merchant charges a fee that is often higher than the banks. When are you going to go after them? By paying the item and charging a fee, we in a lot of cases end up saving the consumer money.

3. I guess its ok for the Check Cashers, who would replace this service to charge enormous amounts of interest.

4. We notify our customers before they get the service, and give them the opportunity to opt out; in fact, they can opt out at any time. The fees associated with an overdraft are also disclosed to customers at account opening and again annually. We have had very few customers opt out, or complain. In fact we have a far greater number of customers thank us for the service.

5. You make it sound like American families are getting deeper into debt due to overdraft fees. Fact is, our overdraft fees are down considerably this year as people tighten their belts, and manage their finances better. Point: People can manage their finances and avoid fees, they simply choose not to.

Clock is ticking

Graham's assertions aside, Congress is hardly known for its antipathy towards the banking industry, but lawmakers have been getting an earful from constituents and fear for their political lives if they are seen as not doing anything to protect consumers. Senate Banking Committee Chairman Christopher Dodd (D-CT) has already announced that he is working on legislation.

"Overdraft protection programs" let customers overdraw their accounts, without their knowledge, when they use checks, electronic transfers, debit card purchases, and ATM withdrawals. Account holders are often enrolled in the programs without their consent and many banks will slap customers with fees of upwards of $30 for this "courtesy" even if their account is only overdrawn by a few cents.

It is a service most customers do not know they have and may not want. According the Center for Responsible Lending (CRL), 80 percent of consumers would rather have their transaction denied than have it covered in exchange for a fee.

A recent survey released by the Consumer Federation of America found the median overdraft fee is $35. The highest is $39, charged by Citizens Bank for the third overdraft in a year. Fourteen of the sixteen largest banks charge $35 or more per overdraft, either initially or after a few overdrafts in a year.

Nine of the largest banks surveyed charge tiered overdraft fees, escalating the cost of more than one or two overdrafts over a year. For example, Regions Bank charges $25 for the first overdraft, $33 each for the second and third, and $35 each for four or more.

The Financial Times reported that banks stand to collect a record $38.5 billion in fees for customer overdrafts this year. The most cash-strapped customers are the hardest hit, with 90 per cent of overdraft fees coming from ten percent of checking account holders. According to CRL, banks collect nearly $1 billion per year in overdraft fees from young adults and $4.5 billion from senior citizens.

ConsumerAffairs.com has received thousands of complaints about overdraft charges. Among them:

• Vesta of Sacramento, California, who writes, "Provident extended me $500.00 courtesy pay on my checking account for being a long time customer. So, if I have an overdraft, the courtesy pay will cover it. But, the problem is, every time I have an overdraft and courtesy pay pays it, they charge me $23.00 fee. If I'm one cent overdraft, courtesy pay will pay it and charge me $23.00 fee."

• Reginald of Washington, DC, tells ConsumerAffairs.com that he has been charged two overdraft fees of $35.00 each by Chevy Chase Bank. "The two charges," he says, "were for amounts of $3.08, and for $1.05. These charges were made prior to a $4.94 purchase at McDonalds. If there was an overdraft, it should have been only one and that should have been for the $4.94 purchase since it was the last purchase." Reginald says a representative of the bank with whom he spoke, "was of absolutely no help whatsoever."

"Excessive, automatic overdraft fees are forcing many American families deeper into debt at a time when they are already struggling to make ends meet," said Dodd. "I am working on a bill to protect consumers from these fees."

Dodd's bill will require customers to "opt-in" to these programs, prohibiting banks from charging consumers overdraft fees without their consent.

CRL President Michael Calhoun expressed his organization's support for President Obama's call for the creation of a new agency to bring oversight to the financial services industry.

"The regulators responsible for making our financial system work have failed," said Calhoun. "We urge Congress to act quickly to create the Consumer Financial Protection Agency so that individual Americans, who account for nearly $7 out of every $10 spent in the economy, can put the money that financial institutions unfairly siphon off to more productive purposes, like buying beneficial goods and services and saving for the future."

Under pressure from Capitol Hill and consumers, Bank of America and JPMorgan Chase are easing up on overdaft charges and other fees.

Banks make billions of dollars per year in revenue from overdraft charges, in many cases levying them on customers who didn't even know they had -- and had never asked for -- overdraft protection. But with Congress considering proposals to impose reforms, banks are trying to get in front of the problem with reduced fees and more lenient term...

Suit seeks class action status and millions in restitution

A group of Fifth Third Bank customers has filed a lawsuit against Fifth Third Bank, seeking refunds of millions of dollars in overdraft charges the plaintiffs contend were taken illegally.

The suit maintains that the overdraft fees were often charged when the customers had enough funds in their accounts to pay for purchases.

"It is one thing to charge an overdraft fee when someone has actually overdrawn their account. It is entirely another to charge an overdraft fee when the customer's account has sufficient funds, said Hassan Zavareei, a partner at the Washington, D.C.-based law firm Tycko & Zavareei LLP, which represents the plaintiffs.

The suit charges that in some cases Fifth Third charges overdraft fees and additional fees for every day an account is overdrawn -- even when an account is overdrawn solely because of bank fees charged by Fifth Third.

"The bank is essentially charging overdraft fees on overdraft fees," said Zavareei. "This is outrageous bank conduct, made worse by the fact that most of the bank's victims are struggling to make ends meet."

The lawsuit was filed in federal court on behalf of Marlene Willard, of Hephzibah, Georgia, and other bank customers who claim they were unfairly and illegally charged overdraft fees by Fifth Third Bancorp for charges they made on their ATM/debit cards.

The class action lawsuit alleges that these fees violate federal and state law, as well as the contractual relationship the bank has with its customers. The lawsuit seeks certification of a class action on behalf of Fifth Third Bank customers who were improperly charged overdraft fees or who received insufficient disclosures about such overdraft fees.

"Manipulation" alleged

The complaint alleges that Fifth Third Bank manipulates debit transaction posting to cause overdraft fees even when there are sufficient funds to pay for a certain purchase. Further, the suit claims Fifth Third Bank fails to properly disclose fees that will be charged at the point of sale, and uses deceptive disclosures in its contract with customers to hide its true overdraft policies.

"We are continuing to investigate Fifth Third and other banks around the country. Customers must be compensated for bank practices that caused hundreds of millions of dollars in improperly charged fees," Zavareei said.

The complaint also alleges that Fifth Third Bank has not allowed its customers to opt out of "overdraft protection," as recommended by Federal regulators.

Fifth Third Bancorp is a diversified financial services company headquartered in Cincinnati, Ohio. The Company has over $100 billion in assets and operates 16 affiliates with 1,306 full-service Banking Centers in Ohio, Kentucky, Indiana,Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina.

A group of Fifth Third Bank customers has filed a lawsuit against Fifth Third Bank, seeking refunds of millions of dollars in overdraft charges the plaintiffs contend were taken illegally.

The suit maintains that the overdraft fees were often charged when the customers had enough funds in their accounts to pay for purchases.

"It is one thing to charge an overdraft fee when someone has actually overdrawn their account. It is entirely another to charge an overdraft fee when ...

Banks are closing branches because they don't think they need them

Bank of America's (BOA) announcement this week that it would close some more of its branches underscores a new reality for the banking industry -- consumers are doing more of their banking business online.

During a conference call to discuss the company's second quarter earnings report, BOA CEO Brian Moynihan mentioned the bank had closed nearly 20% of its branches in the last 5 years, dropping the number from 6,100 to about 4,800. He said more closures would follow, without attaching a number.

BOA is not alone in cutting its overhead. In June Fifth Third Bank announced plans to close 100 branches, the largest branch closing in the bank's history.

Part of an ongoing trend

It's been going on for some time. SNL Financial reports U.S. banks closed a net 1,487 branch locations in 2013, the most since the research firm began collecting the data in 2002.

Industry analysts agree the reason has nothing to do with declining business. In fact, business for banks has never been better. It's just that banks are convinced they no longer need branches because “everyone” is adopting mobile banking.

While mobile banking no doubt is growing by leaps and bounds, this trend will work against consumers who like to conduct their banking business with a human being.

Transformation to smart banking

“Banks are now focusing on integration of futuristic technologies and applications to explore new opportunities for higher customer engagement and improving customer experience,” the company said in a recent report, which focused on technology and application innovations that are enabling the transformation.

Each bank's smart or mobile banking system is different but most offer similar functions. BOA's mobile banking lets customers deposit checks from a mobile device, check account balances and send money to just about anyone.

Changing with the customers

During this week's conference call Moynihan said the bank would save money by closing branches but that isn't the only motivation. They're doing it, he said, because customer behavior is changing. The number of BOA's mobile customers has more than doubled in 4 years to 17 million. The company says 13% of the check's deposited in the bank are coming in by mobile.

If you have fewer branches you need fewer employees. BOA has been steadily cutting staff. Although the bank is beefing up its corps of financial advisors, it has cut more than 70,000 jobs since 2011.

Bank of America's (BOA) announcement this week that it would close some more of its branches underscores a new reality for the banking industry -- consumers are doing more of their banking business online.

During a conference call to discuss the company's second quarter earnings report, BOA CEO Brian Moynihan mentioned the bank had closed nearly 20% of its branches in the last 5 years, dropping the number from 6,100 to about 4,800. He said more closures would follow, wit...

Many consumers feel a bigger bite from their bank

Bankrate.com's latest checking account survey may tell you all you need to know about the state of relations between consumers and their banks. The survey -- the 15th annual -- shows the percentage of free checking accounts offered by U.S. banks continues to fall as other checking fees continue to rise.

Specifically, the cost of using an ATM at the typical bank climbed in the last year. The survey found the average ATM surcharge -- the fee charged by an ATM operator to a non-customer -- rose four percent to a record $2.50.

The average ATM fee increased for an eighth straight year and, for the first time, 100 percent of banks that Bankrate.com surveyed charge non-customers to use their ATMs.

Many banks also charge their own customers for using another company's ATM. This fee jumped 11 percent to $1.57. For a typical bank customer paying both fees, the average total of $4.07 is a record and is up nearly seven percent from last year.

Free checking is fast disappearing

In addition to raising ATM fees, more banks are saving money by doing away with free checking policies. Only 39 percent of non-interest checking accounts surveyed are available to all customers free of charge, down from 45 percent last year and the peak of 76 percent in 2009.

Some banks raised their fees on checking accounts, a move the survey shows tends to lose customers.

Seventy-two percent of consumer say they would consider switching checking account providers if their financial institution raised its fees on checking accounts, compared with 64 percent in March 2011. Households earning $75,000 or more are the most likely to say they would switch, at 82 percent.

Banks saw this demonstrated last November when one disgruntled consumer organized National Bank Transfer Day, a grassroots movement in which hundreds of thousands of consumers switched their accounts to small banks and credit unions, which charge lower fees.

"Checking accounts that are free on a standalone basis continue to diminish," said Greg McBride, Bankrate.com's senior financial analyst. "But a free checking account is still within reach of the majority of Americans, whether by getting the fee waived through direct deposit or moving to a bank or credit union that still offers free checking."

Bankrate.com's latest checking account survey may tell you all you need to know about the state of relations between consumers and their banks. The survey -- the 15th annual -- shows the percentage of free checking accounts offered by U.S. banks continues to fall as other checking fees continue to rise.

Specifically, the cost of using an ATM at the typical bank climbed in the last year. The survey found the average ATM surcharge -- the fee charged by an ATM operator to a...

Despite rising dissatisfaction with banks in recent years, fewer consumers are going without banking services these days.

The Federal Deposit Insurance Corporation (FDIC), which surveys unbanked and underbanked households every 2 years, has found the percentage of households with no bank accounts fell from 8.2% in 2011 to 7.7% in 2013. The share of underbanked households remained essentially unchanged at 20%.

What's responsible for more consumers returning to the bank? The FDIC speculates that an improving economy has something to do with it, along with changing demographics.

Turned off by fees

Millions of consumers dropped out of banking when banks began to rely more heavily of fee income. Consumers living on the margin decided banks were unaffordable when they had to pay a monthly service charge on their checking account and overdraft fees when they overdrew their accounts.

Three years ago a grassroots effort urged fed up consumers to move their accounts from large mega-banks to credit unions and small community banks that charge fewer fees, an event that was declared “bank transfer day.”

However, the banking climate appears to have improved a bit since then. Recent changes in the banking rules have allowed consumers to opt out of automatic overdraft fees and banks face stricter requirements in the way they debit charges, meaning there are fewer cases in which an account is overdrawn.

1.5 million more now use a bank

Working with the U.S. Census Bureau, FDIC determined that 9.6 million households – about 25 million people – were unbanked in 2013, about 1.5 million fewer people than in 2011. About 24 million households were underbanked in 2013, representing about 68 million people.

When asked why they didn't use a bank, 35.6% said the main reason was not having enough money to keep in an account or meet minimum balance requirements.

Alternatives

There are also a growing number of alternatives to banks when it comes to managing money. Some may be as expensive as banks in the long run but might be more convenient to use.

Learnvest, a financial planning firm, notes that online financial institutions like Ally, Capital One 360 and Charles Schwab offer most of the same services as brick-and-mortar banks with less red tape and lower fees. They also tend to pay higher interest rates on savings.

Prepaid cards have emerged as another popular alternative to banks. The debit card can be reloaded with cash, including taking direct deposits, and payments can be made online.

While some cards have more fees than banks, others are very competitive. American Express and Walmart have teamed up on a money card called Bluebird, which has won praise for its modest fees.

The FDIC survey found that prepaid cards are, in fact, popular with people who have no bank. More the 1 in 5 unbanked households – 22% – reported using a prepaid money card in the prior 12 months.

Still turning to payday lenders

On a discouraging note, the survey found that 25% of unbanked and underbanked households used a payday loan or check cashing company in the last year.

"The findings of this survey add to our understanding of the challenges facing unbanked and underbanked households and underscore the value of the FDIC's partnership with the Census to do this survey every two years," said FDIC Chairman Martin J. Gruenberg.

The FDIC concludes that new government strategies could help consumers renew banking relationships as well as support new consumer-friendly alternative banking services.

Despite rising dissatisfaction with banks in recent years, fewer consumers are going without banking services these days.

The Federal Deposit Insurance Corporation (FDIC), which surveys unbanked and underbanked households every 2 years, has found the percentage of households with no bank accounts fell from 8.2% in 2011 to 7.7% in 2013. The share of underbanked households remained essentially unchanged at 20%.

Bankrate.com survey finds average fee has risen 21% in five years

With interest rates near 0%, consumers understandably are reluctant to deposit their money in banks, looking for a higher rate of return elsewhere.

With fees on checking accounts meeting stiff resistance from consumers, who are finding alternatives at credit unions, community banks, and online-only banks, many banks are looking for income where they can find it.

One place is ATM fees. According to Bankrate.com's 18th annual checking survey, the average fee for using an out-of-network ATM rose 4% over the past year to a record $4.52 per transaction. The average fee has risen 21% over the past five years.

The numbers in the survey reflect both the ATM fees charged by the ATM operator and those charged by the consumer’s own financial institution.

Pricey ATMs in Atlanta

Naturally, the fees aren't the same everywhere. The survey found they were highest in Atlanta – $5.15 – edging out New York's average of $5.05.

While San Francisco can be a very expensive city, that doesn't extend to its ATMs. San Francisco's ATM fee averages $3.85 in San Francisco, a penny less than Cincinnati.

ATMs aren't the only area where banks are raising fees. The survey found the average overdraft fee rose to a record high $33.07, up 9% since 2010. Milwaukee has the nation’s highest average overdraft fee – $34.79 – and San Francisco again has the lowest, at $30.35.

Avoidable fees

“The most important thing for consumers to know is that all of these fees are completely avoidable,” said Greg McBride, Bankrate.com’s chief financial analyst. “Shop around for a bank or credit union that fits your lifestyle so that you can keep more of your hard-earned cash.”

You might have to look a little harder. Bankrate says 37% of non-interest checking accounts are completely free, the lowest percentage since Bankrate.com began these annual surveys in 1998.

Free checking accounts peaked in 2009, when 76% of checking accounts had no fees.

Your best alternatives when it comes to finding free ATM use and free checking are online banks, smaller independent banks, and credit unions.

For example, Ally Bank has no fee to use AllPoint ATMs in the U.S. and will reimburse up to $10 per billing cycle for out of network ATMs. Credit Union policies vary but nearly all have generous ATM reimbursement policies, as well as free checking accounts.

"We think there is a gigantic problem with banks in the United States of all shapes, and sizes playing games with the check deposits of small to medium sized businesses,” the organization said in a release.

It said it is concerned that small businesses are being denied access to funds received from customers, even after the customer's check has cleared. It said in some cases, small businesses are paying needless fees for insufficient funds.

With interest rates near 0%, consumers understandably are reluctant to deposit their money in banks, looking for a higher rate of return elsewhere.

With fees on checking accounts meeting stiff resistance from consumers, who are finding alternatives at credit unions, community banks, and online-only banks, many banks are looking for income where they can find it.

One place is ATM fees. According to Bankrate.com's 18th annual checking survey, the average fee for using an ou...

Not if you are willing to shop around for a bank

Years ago consumers opened checking accounts at their local bank and rarely paid a fee, unless they overdrew their account.

Sometimes, even then there might not be a fee. A consumer might get a polite call from the bank manager asking that he or she put some more money in their account. It's a different story today.

The Wall Street Journal reports that the move away from free checking began when regulators clamped down on banks, making it harder to collect debit card fees. Banks are making less money by making fewer loans, with near record low interest rates.

While big banks may offer fee-free checking accounts, they usually have minimum balance requirements that depositors may or may not be able to meet. Fees, in short, make up for a lot of lost bank revenue.

What became of the unconditional, no-fine-print checking account? Has it followed the dodo bird into extinction? Not at all, you just may have to look a little harder to find it.

Look for a small bank

If you live in a small town, it's a pretty easy task since most small, community banks still offer free checking with no or minimal balance requirements. Even some larger regional banks offer the same thing.

First Citizens Bank, which operates in 200 markets with 571 branches, offers free checking. There's no monthly fee and no minimum balance requirement. It takes just $50 to open an account. If you'll look around your community, you can probably find a bank that offers something similar.

There are also online options that are available no matter where you happen to live. Here are three worth considering:

Ally Bank

Ally Bank's Interest Checking Account not only doesn't charge for checking, it pays you. You earn a small amount of interest on your balance, which admittedly won't make you rich, but at least they're paying you instead of the other way around.

There is no monthly maintenance fee and customers have free use of Allpoint ATMs. Out of network ATM fees are refunded each statement cycle, up to $10 – another nice feature.

Capital One 360

Another online option is Capital One 360. Again, there are no monthly fees and you earn a small bit of interest in your checking account. It also gives you fee-free access to Allpoint and Capital One ATMs.

USAA

For consumers in the military, or veterans and their families, USAA offers a wide range of financial services, including a free checking account. The account does not levy a monthly service fee and carries no minimum balance requirement. It offers free direct deposits, free transfers and bill pay, and free use of ATMs nationwide.

Checking account fees at banks that do charge them might not sound very high at $5 to $10 a month, but they add up over time – and they are completely unnecessary for consumers who shop around.

Years ago consumers opened checking accounts at their local bank and rarely paid a fee, unless they overdrew their account.

Sometimes, even then there might not be a fee. A consumer might get a polite call from the bank manager asking that he or she put some more money in their account. It's a different story today.

The Wall Street Journal reports that the move away from free checking began when regulators clamped down on banks, making it harder to collect debit card fees...

These accounts carry no fees and pay interest each month

The banking landscape has gotten extremely competitive in recent years, and much of that competition has been coming from online banks, with no brick and mortar locations.

Without that overhead, and the personnel it takes to staff physical locations, online banks are in a position to offer consumers better deals and still be profitable.

Personal finance site WalletHub has studied online banks, choosing what it says are the best checking and savings accounts. What they have in common is an absence of fees and higher rates of interest than you'll find at brick and mortar banks.

Best overall

Earning best overall honors is the Bank of Internet USA Rewards Checking Account. Right off the bat, it earns big points for not charging fees – no monthly fee, no overdraft fee, no insufficient funds fee. It's even free to use ATMs.

Customers can earn a higher rate of interest on their checking account balances, but to earn the highest rate – 1.25% – you have to meet monthly goals, such as making direct deposits and engaging in a certain number of debit card transactions.

WalletHub has identified AmericaNet Rewards Checking as the account with the best interest rate. It pays up to 1.5%, but imposes a number of conditions, such as using your debit card a certain number of times.

There is no monthly maintenance fee, you can open an account with as little as $1, and the bank will reimburse you up to $25 per month for ATM fees.

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